THE INCORPORATED OWNERS OF PO HANG BUILDING v. SAM WOO MARINE WORKS LTD

CACV 405/2021 & CACV 406/2021
(Heard together)

[2022] HKCA 1227

CACV 405/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 405 OF 2021

(ON APPEAL FROM LDBM NO 252 of 2014)

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CACV 406/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 406 OF 2021

(ON APPEAL FROM LDBM NO 255 of 2018)

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D E C I S I O N   ON   C O S T S

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Hon G Lam JA (giving the Decision on Costs of the Court):

1.  In our Judgment in these appeals,[1] we made the following costs order nisi at §55:

(1)  the IO is to pay half of Sam Woo’s costs below in LDBM 252/2014;

(2)  Sam Woo is to pay the IO’s costs below in LDBM 255/2018;

(3)  the IO is to pay half of Sam Woo’s costs of the applications for leave to appeal in this court and below;

(4)  there be no order as to costs in CACV 405/2021; and

(5)  Sam Woo do pay the IO’s costs in CACV 406/2021.

2.  By a summons in each of the appeals, the IO has applied for variation of (1) and (3) above to the following:

-  in place of (1) above: Sam Woo do pay half of the IO’s costs below in LDBM 252/2014; alternatively, there be no order as to costs below in LDBM 252/2014.

-  In place of (3) above: there be no order as to costs of the application for leave to appeal from LDBM 252/2014 in this court and below; and Sam Woo do pay the IO’s costs of the application for leave to appeal from LDBM 255/2014 in this court and below.

3.  Neither party has sought to vary the orders in (2), (4) and (5) of §1 above.

4.  Directions have been given for written submissions to be lodged in place of an oral hearing.  This is our decision on the IO’s application to vary the costs order nisi based on the written submissions received.  The background to the litigation, the parties’ respective cases, the outcome in the Lands Tribunal, our decisions on the issues raised in the appeals and the reasons therefor, and the outcome of the appeals, may be seen from our Judgment and the Lands Tribunal’s judgment,[2] and will not be repeated here.

5.  The IO’s submissions for varying (1) above may be summarised as follows.  The IO is the winning party in the Tribunal in LDBM 252/2014 because Sam Woo’s claim was wholly dismissed by the Tribunal and its appeal therefrom (CACV 405/2021) was dismissed by this court.  There are no special circumstances to justify departure from the “costs follow the event” principle.  Even if an issue-based approach is adopted, although this court ruled there was no res judicata, that argument was part of the larger issue of whether the IO was required to apply all the surplus attributable to a particular class of owners in one year towards payment of the expenses payable by that class of owners in the immediately following year – an issue on which the IO won.  It was not an argument unreasonably or improperly raised by the IO.  As for Contention 3, which was conceded by the IO during the appeal, it was not a sufficiently distinct issue to constitute an event; it was not seriously disputed by the IO in the Tribunal and the issue was not unreasonably or improperly raised by the IO.

6.  The IO’s ground for varying (3) above is that since this court made no order as to the costs of the appeal in CACV 405/2021 and ordered Sam Woo to pay the IO’s costs of the appeal in CACV 406/2021, the costs of the leave applications in this court and below should follow these orders respectively.

7.  Sam Woo opposes the IO’s application to vary and contends that the costs order nisi should be maintained.

8.  Dealing first with the costs of LDBM 252/2014, we take the view that Ms Wong’s submission that the IO was the winner below is flawed. Who the successful party below was, or should have been, has to be assessed with reference to the actual outcome and reasons in this court.  Although the Tribunal dismissed Sam Woo’s claim, based on the reasons given in this court’s judgment and the IO’s concessions eventually made during the hearing of the appeal, Sam Woo should have been entitled to at least a partial account of the accumulated surplus (see §42 of this court’s judgment) and an order that the surplus be allocated for the account of the three classes of owners respectively (see §22 of the Tribunal’s judgment).  There would have been a determination, and probably a declaration, in favour of Sam Woo on Contention 3 and the interpretation of clause 3(j) of the DMC: see §41 of this court’s judgment; contrast §§50-56 of the Tribunal’s judgment. 

9.  As to Contention 2, while Sam Woo failed on its argument on the timing of the application of the surplus (see §§37-49 of the Tribunal’s judgment and §§43-50 of this court’s judgment), it prevailed in this court, and therefore ought to be regarded as also having prevailed below, on the interpretation of clause 3(i) of the DMC: see §§35-40 of this court’s judgment; contrast §§50-56 of the Tribunal’s judgment.  In addition, the res judicata argument raised by the IO eventually failed.

10.  Sam Woo had to institute the proceedings in the Tribunal to obtain, eventually, judicial determination or the belated concession of the IO on the construction of clauses 3(i) and 3(j) of the DMC and the proper allocation of the surplus funds.  It should in our view be regarded as having prevailed below in LDBM 252/2014.  The order nisi in (1) above recognises that Sam Woo had nevertheless failed on some of the issues raised, so that it was awarded only half of the costs.  Further, it should not be forgotten that at the same time we also ordered Sam Woo to pay the IO’s costs below in LDBM 255/2018, where Sam Woo’s defence to the claim for unpaid management fees based on its arguments in LDBM 252/2014 wholly failed.

11.  For these reasons, we see no valid reason to vary the costs order nisi in (1) above.

12.  As to the order nisi in (3), there is some superficial logic for Ms Wong to submit that since CACV 406/2021 was wholly dismissed, the IO should have the costs of the leave application below and in this court.  However, in making the order nisi in (3), we had taken a combined view of the two appeals.  Sam Woo had valid grounds for appeal in CACV 405/2021 and leave to appeal should have been given.  Whilst its appeal was eventually dismissed, it managed to obtain the determination of this court on the interpretation of parts of the DMC as well as significant concessions by the IO which were only made at the hearing the appeal.  Sam Woo should therefore at least arguably be entitled to the costs of the leave applications below and in this court so far as CACV 405/2021 is concerned.  Instead of dealing with the costs of the leave applications in relation to CACV 405/2021 and CACV 406/2021 separately, and taking a broad brush approach, the order nisi gave Sam Woo half of the costs of the leave applications overall.  Having considered the IO’s submissions, we remain of the view that the order nisi is a fair and just way of disposing of the question of the costs of the leave applications.  Accordingly, we also decline to vary order nisi (3).

13.  For the above reasons, the IO’s variation summonses are dismissed.  The IO has to pay the costs of Sam Woo in relation to the two summonses.